Safaricom Chief Executive Officer Bob Collymore Wednesday. The firm’s profit have declined due to increasing competition and rising operational costs.
Safaricom share dropped 3.3 per cent to Sh2.90 Thursday as investors reacted to a sharp decline in the company’s half-year profits announced on Wednesday. (READ: Safaricom earnings down 47.4 per cent)
The stock touched a low of Sh2.70 before edging higher on increased demand on the counter especially from foreign investors later in the day. “Investors are still analysing the firm’s profit decline,” said Gregory Waweru, an analyst at Kestrel Capital. “The market seems to have been anticipating a drop in the company’s performance and so the share price was already depressed,” he said. The counter was the most traded at the Nairobi Securities Exchange yesterday moving about nine million shares. Safaricom’s half-year earnings dropped by 48 per cent to Sh4 billion, down from Sh7.6 billion in the first half of 2010 on the back of a surge in operating costs caused by the weak shilling and reduced revenues from voice calls.
Bob Collymore, the company’s chief executive linked the sharp declines in profitability to the reduced revenues from lower calling tariffs rates, the weakening shilling which have piled pressure on its operating costs and forex losses amounting to Sh1.4 billion. The company, however, moved to raise its calling rates last month, a move that analysts predict will lift its performance in the second half of the year.
Standard Investment Bank researchers project that the telecommunications firm will book improved performance in the second half on the strength of higher calling rates.
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